KYC360 Weekly Roundup

Published on Oct 14, 2022

Spotlight on PEPs

This week we shine the spotlight on politically exposed persons (PEPs). While there is no single, globally agreed definition of a PEP, according to the Financial Action Task Force (FATF) it refers to any individual who is or has been entrusted with a prominent public function. It is because of their position and influence that it often leads to systematic abuse which can quickly spiral out of control; to quote the centuries-old adage, “Power corrupts, and absolute power corrupts absolutely”.

Corruptive power can also extend to authoritarian regimes, which may go some way to explaining why Russia, Iran, and Myanmar all feature in the latest sanctions to be unveiled this week. We also report on the latest developments surrounding the ever-evolving crypto sector and cover why environmental and social governance (ESG) requires greater focus from the world’s business community.

Finally, to complete this week’s Roundup, we deliver the latest global legislation, reports and analyses, together with global news covering money laundering, corruption, bribery, and fraud.

FATF guidance on politically exposed persons

It has long been recognised that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering offences and related predicate offences, including corruption and bribery, as well as conducting activity related to terrorist financing (TF). This has been confirmed by analysis and case studies laid out in this FATF guide.

Online Resource: How to search for politically exposed persons

OpenSanctions helps investigators find leads, allows companies to manage risk, and enables technologists to build data-driven products. In this section of their website, you can search through a database of thousands of politicians, judges, diplomats and other figures in positions of power to see if a potential business associate is classified as a PEP

Ex-Malaysia Prime Minister’s private Ambank account was once marked ‘sensitive’ 

The High Court of Malaysia heard that former prime minister Datuk Seri Najib Razak’s private Ambank account was once marked as ‘sensitive’ as he was a politically exposed person (PEP). Najib is currently facing four charges of using his position to obtain bribes totalling RM2.3 billion from 1Malaysia Development Berhad funds and 21 charges of money laundering involving the same amount.

How one family is being blamed for ruining Sri Lankas economy  

Sri Lanka is bankrupt, and many blame the current economic crisis on the Rajapaksas. In the 20 years they have been in power, they have been accused of financial mismanagement at best and siphoning off millions of public funds at worst, yet they have never been convicted of any crimes.  

Taiwanese tycoon may have used girlfriend to hide tens of millions at Credit Suisse 

When Sun Daocun died in 2021, he left behind a long list of unresolved debts. Data from inside Credit Suisse reveals how his girlfriend, Yen Ling-Ning a known proxy for his business affairs, may have prevented his wealth from being confiscated by secreting it at the Swiss bank. 

Former Kazakhstan President’s nephew sentenced to 6 years for embezzlement 

The imprisonment of influential businessman and former security officer Kairat Satybaldy, the son of Nazarbayev’s younger brother, is the first verdict against a close relative of the country’s once powerful ruler. Satybaldy, along with four accomplices, was found guilty of stealing more than US$58 million and causing damages worth over $25 million.

US appeals court upholds bribery conviction of Barbados’ former minister of industry 

A New York appeals court dismissed an attempt by Donville Inniss to quash his 2020 conviction for laundering the proceeds of a bribery scheme. The former minister of industry of Barbados, was found guilty in 2020 for his role in a scheme to launder bribes paid to him by the Insurance Corporation of Barbados Limited. 

 

Financial_ServicesMoney Laundering, Fraud & Corruption

Swiss government to track corporate ownership in bid to curb money laundering  

The Swiss government is planning to create a central registry to track who actually owns legal entities in order to fight money-laundering through shell companies. The cabinet has asked the finance ministry to draft specific proposals by mid-2023 to make it easier to identify corporate owners thereby increasing transparency.

UAE seizes $1.29bn in assets in fight against money laundering and terrorism financing 

The United Arab Emirates (UAE) has seized and confiscated assets worth over Dh4.73 billion ($1.29bn) over the last 12 months as it steps up its fight against money laundering and the financing of terrorism. In August, the Central Bank of the UAE issued new guidelines to help licensed financial institutions combat money laundering and terrorism financing on risks related to payments. 

US rancher sentenced to 11 years in prison for $244 Million ‘ghost cattle’ scam 

The rancher was sentenced for defrauding two meat processing companies of over US$244 million by raising 265,000 bovines for them that never existed. Cody Allen Easterday, 51, pleaded guilty to orchestrating a “ghost cattle” scam in what the sentencing judge called the biggest theft or fraud he had seen in his career. 

Danske Bank’s role in one of Europe’s biggest money laundering operations 

The Danske Bank scandal involved an estimated $236 billion being laundered through its Estonian office. This report exposes the negligence fuelled by a lack of communication between the Bank’s Executive Board and the Estonian branch’s management, which was later found to be extremely corrupt. 

How corruption in the football world tainted Qatar’s World Cup 

While there is no chain of evidence linking Qatar to any kind of corruption in securing its World Cup bid success, Qatar 2022 remains an event tainted at the very outset. This article explores how individual corruption among Fifa’s executive committee and others helped contribute to the furor surrounding one of the most significant votes in the history of the modern game.

 

RequirementsLegislation, Regulation and Sustainability

Report: Procedures for the FATF Fourth Round of AML/CFT Mutual Evaluations 

The FATF is conducting a fourth round of mutual evaluations for its members based on the FATF Recommendations (2012), and the Methodology for Assessing Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems (2013). This document sets out the procedures that will form the basis for the fourth round of mutual evaluations. 

Financial Action Task Force to put Congo on grey list

The FATF is planning to put Democratic Republic of Congo on a list of countries subject to increased monitoring later this month. Congo, a major cobalt and copper producer, will go on the global financial crime watchdog’s grey list of deficient countries for shortcomings in stamping out financial corruption, money laundering and anti-terrorist financing. 

Report: Analysing the potential scale of abuse of UK limited liability partnerships in economic crime 

By utilising data from Companies House and more than 50 corruption and money laundering cases, this paper sets out the likely scale of abuse of Limited Liability Partnerships (LLPs) in high-level white-collar crime. While this problem has been well documented in exposés by journalists and recognised by the government, until now its extent has remained unknown. 

Report: Top trading countries doing even less than before to stop foreign bribery 

Transparency International’s new report, Exporting Corruption 2022, rates the performance of 47 leading global exporters in cracking down on foreign bribery by companies from their countries. The overall picture has been worsening since its 2018 study, hitting a new low this year, with only two of 47 top exporting countries actively enforcing against cross-border bribery.

Analysis: The latest trends, threats and opportunities in financial crime and anti-money laundering 

In this insightful analysis, Baptiste Forestier has identified the latest trends, threats, and opportunities in financial crime and anti-money laundering (AML) to assist professionals who work in the AML, anti-financial crime, and compliance sectors. 

Opinion: Dirty money undermining European democracy 

The EU has started to deal with criminal finance through successive anti-money laundering directives, action plans and the launching of the new Anti-Money Laundering Authority. However, there are less obvious forms of dirty money, the so-called “active financial measures” that have been undermining Europe’s political institutions, buying influence through the sponsorship of cultural and sporting events, and even seeking to sway the outcome of elections.

Robert Mazur: “I’ve seen first-hand how an understaffed IRS has trouble catching major tax cheats” 

Since 2010, the enforcement budget of the IRS has been cut by 31%. Robert Mazur, a federal agent for 27 years who worked undercover as a money launderer within Pablo Escobar’s Medellin Cartel, examines the implications of the reduction in the numbers of revenue agents and special agents who investigate big-time tax cheats. 

Report: The Future of ESGTech 2023 

This special Sibos report features expert views from SWIFT, GLEIF, and NayaOne, and explores many important issues surrounding ESG such as climate disclosures, ESG standardisation, greenwashing, and financial inclusion. 

Report links 3 central banks to deforestation in Brazil 

According to a report published by Global Witness, three of the world’s largest central banks allegedly purchased millions of dollars in corporate bonds from agribusinesses heavily linked to illegal deforestation of climate critical forests and land grabs in Brazil. 

Documentary: The Green Energy Scandal Exposed 

The wood burning Drax power station provides 12% of the UK’s renewable energy and has received £6 billion in green energy subsidies. Britain’s biggest power station claims to burn imported wood pellets which are classed as renewable energy, but as this documentary reveals, some of the wood comes from environmentally important primary forests in Canada. 

British Gas ‘misleading’ customers over green energy claims 

British Gas has been accused of misleading customers by selling them green energy that may have no environmental benefit. While the energy giant claims to reduce its climate footprint by using ‘carbon credits’, an investigation reveals that half the carbon offsets held by British Gas owner Centrica are junk credits that were issued under a discredited scheme that critics have called a scam. 

 

Crypto-1Crypto & Virtual Assets

Report: Cryptoassets and their risks for financial stability 

As cryptoassets have grown in popularity, so has the interest in their implications for the traditional financial system, including financial stability. The European Securities and Markets Authority (ESMA) has been following these developments closely for several years, and outlines in this article the latest understanding of cryptoassets’ risks and transmission channels to financial markets. 

EU tenders for blockchain data and DeFi project 

The European Commission has put out a tender for a study on “embedded supervision of decentralised finance”. The study will entail a six-month pilot project to develop, deploy and test a technological solution to enable regulatory bodies to automatically monitor compliance by reading public blockchain data.

CCAF updates Bitcoin emissions estimate 

The Cambridge Centre for Alternative Finance (CCAF) has published an update to its Cambridge Bitcoin Electricity Consumption Index (CBECI) which provides estimates on Bitcoin greenhouse gas emissions. This new tool finds that 199.65 million tonnes of carbon dioxide equivalent (MtCO2e) can be attributed to the bitcoin network since its inception, with 92% of this occurring since 2018. 

PKO Bank Polski opens metaverse outpost 

PKO Bank Polski has set up a virtual branch on the ‘Decentraland’ platform and moved one of the most recognisable buildings in the capital of Poland into the metaworld. The virtual branch will be used as a laboratory to gain knowledge and experiences, which will be leveraged for the development of its business. 

Visa and FTX take crypto debit card worldwide 

FTX has agreed a global agreement with Visa to offer crypto-linked debit cards to customers in 40 countries. Already available in the US, the FTX account-linked Visa debit cards will now be rolled out in dozens of countries, allowing users to convert and pay for goods and services with the crypto balance in their FTX wallets at the 80 million merchant locations worldwide that accept Visa. 

India to launch pilot project of digital rupee 

The Reserve Bank of India is to launch a limited pilot scheme to test a digital rupee for specific use cases The RBI is working towards a phased implementation strategy by planning various pilots before a final launch. The RBI’s fintech department says they will help prepare for a watershed moment in the evolution of currency that will decisively change the very nature of money and its functions. 

 

Sanctions-1Sanctions

Zelenskyy calls for new Russia sanctions as Putin targets key Ukrainian infrastructure 

Ukrainian President Volodymyr Zelenskyy has called for tougher sanctions on Russia after the Kremlin indicated that it will continue to target critical infrastructure across Ukraine. At the G7 virtual meeting Zelenskyy urged leaders to provide more missile defence systems in order to protect Ukraine from Russian air strikes. 

“Restoration works are taking place quite quickly and efficiently throughout the country. If it wasn’t for today’s strikes, we would have already restored the energy supply, water supply and communications that the terrorists damaged yesterday.” 
Ukrainian President Volodymyr Zelenskyy

Ukraine sanctions former president Yanukovich, former defence minister Lebedev and 2 businessmen 

Ukraine has signed a decree imposing sanctions on former president Yanukovich, former defence minister Pavel Lebedev, Ukrainian businessman Sergey Kurchenko and Oleg Deripaska. All their assets in Ukraine are now subject to a freeze for 10 years. 

Dutch police arrest man for breaking sanctions by supplying Russia with microchips for military use 

A 55-year-old man is accused of violating sanctions by supplying Russia with computer microchips which could be used for military purposes. The Dutch financial crimes inspectorate, FIOD confirmed the arrest, stating that it is known that the Russian arms industry is currently struggling with a serious shortage of these microchips.  

UAE prince accused of helping Russian oligarchs to evade sanctions 

The billionaire deputy prime minister of the United Arab Emirates, Sheikh Mansour bin Zayed Al Nahyan, could be investigated over allegations that he helped Russian oligarchs evade sanctions. Sheikh Mansour, who also owns Manchester City Football Club, could be investigated over charges that he helped Roman Abramovich, and other Russian billionaires circumvent sanctions and face sanctions himself if found guilty. 

UK businessman arrested for conspiracy to violate sanctions imposed on Russian oligarch 

A UK businessman has been arrested in the US for conspiracy to violate the sanctions imposed on Russian oligarch Oleg Vladimirovich Deripaska. He has also been charged with wire fraud in connection with funding properties purchased by the oligarch and efforts to expatriate Deripaska’s artwork through misrepresentations. 

US and UK governments announces sanctions against Iran’s morality police and senior officials 

The UK has announced sanctions against Iran’s morality police, its national chief, and the head of its Tehran division in response to the violent suppression of protests following the death of 22-year-old Mahsa Amini. The US has also acted with the Office of Foreign Assets Control (OFAC) designating Iran’s Minister of the Interior, Ahmad Vahidi, and Iran’s Minister of Communications, Eisa Zarepour, as well as five other senior leaders of Iran’s security apparatus. The EU is expected to follow suit in due course.

US adds to Myanmar sanctions over arms sales and human rights abuses

The OFAC has listed 3 people and 1 entity connected to Myanmar’s military regime. Aung Moe Myint, a businessman who is alleged to have facilitated purchases of Russian-produced weapons on behalf of Myanmar’s military, has been designated alongside Dynasty International Company Limited, a company he founded, his brother and co-founder Hlaing Moe Myint, and director Myo Thitsar.

 

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